ETF Focus

Build America Bonds' Scarcity Vexes ETFs

Liquidity could become an issue down the road. Here's how to handle the problem.

Remember Build America Bonds? Interest-rate worries have put this roughly $180 billion corner of the taxable muni market on track for its first-ever annual loss. Created as part of President Obama's 2009 stimulus plan, BABs are generally high-quality infrastructure bonds with above-average yields, so the drop will strike some as a chance for bargain-hunting.

Owners of exchange-traded funds focusing on these bonds face a special obstacle: The supply of Build America Bonds is gradually drying up. There hasn't been a new...